For Sale By Owner.... It works till it doesn't
Written with permission from my client:
I was a mortgage broker to a young man that was purchasing his 1st home. He stumbled upon the perfect home for him, great location “On Golden Pond” not many of these properties for sale “Ever”.
It was a “for sale by owner”
He viewed the property knowing it needed some repairs. What he didn’t know was how many repairs really needed to be done.
Did you know an individual selling a home has different rules than a realtor who’s listed a property?
If a home is listed through a Real Estate agent “they must” fully disclose any problems with the property that they know about.
Okay so on with this purchase…
My client decided to place an offer on the property. He called me up asking for advice on what to do (first time buyer). At this time, I suggested he contact a realtor (a buyers agent) to work on his behalf. He was reluctant to do so, as there would be cost involved. So next in line would be to speak with a lawyer. He did and he wrote the offer based on a conversation with the conveyancing secretary.
He received the address names of sellers etc. from the individual who was looking after the sale (a family member).
When I received the offer 4 days after it was written my work on the file begins.
I needed property details square footage of home lot etc. without this information I’m unable to submit my file to the lender/insurer. It took quite a bit of time for the borrower to get this information from the seller. I'm at a stand still till I receive this information.
In the mean time I pulled a property title. What I found, was there were 4 people on title (not just the 2 that originally signed the offer). What this means is that an addendum (change to contract) is now required to add the other seller’s names onto the contract and have everyone sign it. So the client is back on the phone with the lawyers office to complete an addendum. Another delay around 8 days before I receive the signed addendum. Finally, I receive the property details.
A Realtor would have done all this within 24 hours, with no need to involve a lawyer. A Realtor typically has access to digital signature platforms so even if clients cannot do face to face signings they can obtain E-Signatures.
I now have the information to send to the lender and we’re off to the races 😊
In the mean time my borrower is doing his due diligence and organized a property inspection and an appraisal is ordered as well (private sales generally need an appraisal completed). A two week delay to have this organized with the seller. What the borrower and I didn’t know is the home inspector and property appraiser showed up at the same time.
A Realtor may have staggered these appointments so no cross chatter would have happened for or against the property. In My opinion a bit of a conflict there.
The borrower addressed his concerns about the property deficiencies with the current owners and requested a price reduction on the home. Again, we are waiting for signatures from the seller for a price adjustment. I was getting nervous, questioning why the delays were taking place.
How long would it take the realtor to obtain the initials?
We are 5 weeks into this transaction and we still don’t have the necessary paper work. Still waiting for changes and completed initials on the contract. The buyer is getting deflated and exhausted with this process and admitted if he could rewind the clock, he would have hired the expertise of a realtor.
A realtor does the running around to get the necessary documents and signatures so you can focus on your job.
We are now 46 days from the initial Offer date. In reviewing the documents from the seller and updating the lender we finally have what we need to sign a Mortgage Commitment. All the pieces of the contract are signed, initialed , changes made to Condition dates and a new possession date completed. A big sigh of relief. Mortgage documents will be prepared and sent to the lawyer from the lender.
A Realtor would have sped this process up to a maximum of 2 weeks
There was a delay in possession date, which wasn’t ideal for the buyer, however, in the end (based on the appraisal) the buyer bought this home for approximately $40,000.00 under market value.
So, the losers in this transaction were the sellers who didn’t trust the expertise of a Real Estate Agent.